Oil futures extend gains amid unrest

Brent crude flirts with $110 a barrel; WTI at best in 28 months

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SAN FRANCISCO (MarketWatch) — Crude futures on Wednesday settled at their highest since October 2008, briefly trading above $100 a barrel as concerns about civil strife in Libya and antigovernment protests elsewhere in the Mideast and North Africa roiled markets.

Light sweet crude for April delivery
CLJ11
the new benchmark contract, gained $2.68, or 2.8%, to finish at $98.10 a barrel on the New York Mercantile Exchange.

That was oil’s highest finish since Oct. 1, 2008 -- when oil prices were on their way down from a settlement high past $145 a barrel that summer.

“It’s a continuation of the pattern of panic buying, less frenetic than it was [Tuesday],” said Bill O’Neill, a principal with Logic Advisors in New Jersey. “The market remains concerned about contagion and the situation in Libya.”

The April contract hit an intraday high of $100.01 a barrel, the first time oil reached an intraday high of $100 since Oct. 2, 2008.

Brent crude, the benchmark European oil contract, also picked up steam. Brent for April delivery advanced $5.47, or 5.2%, to settle up to $111.25 a barrel on the ICE Futures exchange in London. That was Brent’s highest settlement since August 29, 2008.

Gasoline futures also rose, trading at their highest since mid September 2008.

Anti-Gadhafi protesters in Tobruk and Benghazi said they had taken control of these eastern Libyan cities. Some Army personnel there had joined with the anti-Gadhafi movement and were working alongside the protesters, according to reports.

“While we have the potential to see supply additions from [the Organization of the Petroleum Exporting Countries], there is concern as to whether we will see a one-for-one replacement. If, for example, we were to lose 1.3 million barrels a day of Libyan exports, we would need Saudi Arabia and the [United Arab Emirates] to push production up to levels not seen since the peak of 2008,” analysts at J. P. Morgan wrote in a note Wednesday.

At least one analyst saw oil well above its settlement record high due to the unrest in the Middle East and North Africa.

Crude futures prices could peak above $220 a barrel if Libya and neighboring Algeria “were to halt oil production together,” said Michael Lo, an analyst with Nomura.

The closest comparison to current unrest in the Mideast and North Africa is the 1990-91 Gulf War, he wrote in a note. The unrest could also reduce OPEC’s spare capacity to levels last seen during that war and in the summer of 2008, according to Lo.

Several oil companies have announced personnel evacuations from Libya, including the U.K.’s BP PLC
BP, -0.55%
and Germany’s Wintershall AG, the oil and gas unit of chemicals concern BASF AG (BAS)
BASFY, -1.08%
which also announced it has halted its operations in the country.

In a statement late Tuesday, the United Nations Security Council “condemned the violence and use of force against civilians, deplored the repression against peaceful demonstrators and expressed deep regret at the deaths of hundreds of civilians.”

The council urged an immediate end to the violence and called on Libya to address the legitimate demands of its population.

Libya holds about 44 billion barrels of oil reserves and is among Africa’s largest producers, with most of its oil going to Europe. It also supplies a big chunk of Italy’s natural-gas needs.

OPEC and the International Energy Agency indicated Tuesday that they would tap their stockpiles if the situation deteriorates further.

Meanwhile, gasoline for March delivery
RBH11
added 11 cents, or 4.3%, to $2.71 a gallon. That was gasoline’s highest settlement since Sept. 12, 2008.

So far this year, gasoline futures have gained 11%.

Heating oil for March delivery
HOH11
also rose to its highest since the third quarter of 2008, advancing 11 cents, or 4%, to $2.90 a gallon.

That was heating oil highest settlement since Sept. 26, 2008. So far in 2011, heating oil futures have gained 14%.

March natural gas
NGH11
overcame early weakness to turn higher on Wednesday, advancing 3 cents, or 0.9%, to $3.90 per million British thermal units.

“The focus remains on current moderate temperatures,” with forecast revisions showing “less heating demand for the U.S.,” wrote Tim Evans, an analyst with Citigroup’s Citi Futures Perspective, in a note.

Key East Coast markets are still expecting warmer weather in the coming days, and despite Wednesday’s uptick, natural gas is likely to trade lower in the near term, said Subash Chandra, a natural-gas analyst and managing director at Jefferies & Co. in New York.

The Energy Information Administration is scheduled to report on natural-gas reserves Thursday at 10:30 Eastern time.

Analysts polled by Platts expect a decline of 81 billion to 85 billion cubic feet for the week ending Feb. 18. That would be smaller than the 174-Bcf decline in the comparable week in 2010 and below the five-year-average withdrawal of 148 Bcf.

The EIA also reports Thursday on crude, gasoline and distillates inventories for the week, a day later than usual due to Monday’s Presidents Day holiday. The data are due at 11 a.m. Eastern.

Analysts polled by Platts see an increase in crude inventories by 1.4 million barrels. Gasoline stocks are seen up 950,000 barrels, while stocks of distillates, which include heating oil and diesel, are expected to decline 1.7 million barrels.

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